The course weblog for PA5113, State and Local Public Finance, at University of Minnesota

Wednesday, May 13, 2015

Regional Rail in PA and MN

Considering the strong aversion at both the state and federal
level to raise the gas tax, it is refreshing to see bipartisan action to fund
transportation infrastructure in Pennsylvania based on a fuel tax.
Recently, the state of Pennsylvania approved a bill called Act 89 to eliminate the state gas
tax and move entirely to an Oil Company Franchise Tax (OCFT). The new law
requires an annual increase in both “the millage rate and the average wholesale
price of fuel on which the tax rate is determined.” According to TASG, an
advisory group, “the millage rate is increased by an additional 64 mills in
calendar year 2014, 49 mills [in] 2015, 48 mills [in] 2016, 41 mills [in] 2017, and 39 mills in each succeeding calendar
year” (TASG). Pennsylvania gas taxes
are now the highest in the nation, at 68.9 cents (pennlive.com). Throughout the
state, gas prices are still below $3 per gallon. To put this in perspective,
Norwegians paid almost $8 per gallon this month (globalpetrolprices.com).

After 5 years, Pennsylvania's Act 89 will provide $2.3 billion in funding for
transportation, $500 million of which will go towards transit. SEPTA provides transit
service including 13 regional rail lines and receives funding from federal, state,
and local sources. Prior to 2007, the financing formula has not worked well since
SEPTA was subject to the annual appropriations process. With the passage of Act
89 in 2013, SEPTA is better able to confront its serious backlog of deferred
maintenance especially for its regional rail division.

The federal Highway Trust Fund (HTF) supports transit throughout
the nation and is insolvent. SEPTA will
need to be proactive about financing to maintain its aging system. I recommend
that they pursue more innovative value capture policies. These include joint
development (JD) at transit oriented developments (TODs). JD can take many
forms and can involve the federal government or not. Transit agencies have sold
or transferred air rights for development projects or shared operating costs
for shared equipment with adjacent buildings (such as HVAC ). Long term ground leases can provide stable
revenues for a transit agency in a transit station area while also increasing
ridership.

Minnesota’s Northstar Commuter Rail is only a small fraction of
SEPTA's regional rail. Metro Transit, the
Twin Cities regional transit agency, is a branch of the Metropolitan Council
which is the planning organization for the Twin Cities. The Northstar system benefits from Metro Transit’s
connection to planning since TOD goals are linked to transitway planning and
community planning.

Ultimately, political discussions of regional rail are a subset
of public transit discussions. Public
transportation and road infrastructure projects often compete for funds rather than
being seen as complements to the other. Until the U.S. rectifies the artificially low cost of driving, both transit and road infrastructure funding will be a challenge.